Planning and forecasting are essential, foundational components of any company’s year-over-year operations and execution. These processes help align the company around a set of goals and targets staff can collectively achieve together.

Yet these processes are just as frustrating as they are essential. For many companies, planning and forecasting are painful exercises, taking up a lot of time and adding little value to the overall operations of the company, beyond the annual target setting and periodic evaluation against those targets. Planning and forecasting involve a broad cross-section of a company, pulling employee time away from other valuable activities.

The role of CFOs in planning and forecasting

CFOs and a company’s finance function play important roles within these processes. Oliver Wyman explored what is working and what is not within financial planning and analysis in our second biennial CFO survey in 2022. This survey featured in-depth interviews with more than 50 CFOs at leading global companies across industries and sectors, with around three quarters from financial services and the remainder from the healthcare and travel sectors.

Our findings on forecasting and planning found that most companies execute a traditional annual plan and periodic reforecasting of the plan during the year. Many CFOs stated the process remains burdensome for the organization and still relies on traditional approaches for most organizations. However, some CFOs shared improvements that they have implemented and have benefited from, which others can adopt as well.

This point of view builds off of the first installment in our CFO Survey series exploring the results, which focused on the role of business partnering. It builds on the lessons from that piece, which highlighted how CFOs can be better equipped as a strategic partner to support the growth and development of a company. This piece applies the same analysis to the planning process and offers recommendations on how to improve processes relying on the CFO’s strategic mind.

Overcoming barriers to financial planning and analysis

The Oliver Wyman survey found that just over half of CFOs say that their annual planning process is not good. One main reason for this frustration is the manual nature of most planning, with work being dependent on spreadsheets and not integrated into a core planning software tool. The planning process is also frequently very lengthy, requiring three or more months to complete, as well as very rigid, with a limited ability to pivot the view of the plan to account for changes in macroeconomic factors.

Opportunities for improvement in annual planning

CFOs saw some clear opportunities to improve the annual planning process and unlock value for their teams and the company. These included:

Streamlining governance

Improve the governance process through streamlining the review and keeping a focus on items of the highest priority. For example, one CFO cited common issues with the board giving undue focus on a $1 million line item, even though their balance sheet went down by $1 billion in the market on the day of the survey interview. Establishing materiality thresholds can help keep focus on items of value.

Utilizing tech

Leverage technology to further automate and streamline activities, with the primary objective of accelerating the planning and forecasting processes. Many CFOs had technologies in house which could support greater automation, but their teams were not using them to their highest potential. Many would fall back on spreadsheets and other manual tools despite having trained teams to use the more automated systems. Fully embedding this automation can help the company move more quickly, shifting focus away from the plan and back to running operations. The automation also helps to reduce errors.

Separating assumptions

Create a plan that stores the core assumptions of business activity (units sold, customers serviced) separate from external factors (inflation, cost of select commodities, foreign currency movements). This can help CFOs and their teams leverage scenario-based models to identify potential outcomes based on macroeconomic outcomes. Handling assumptions in this way also streamlines the forecasting process, allowing business leaders to have components auto-calculate and more quickly yield updated forecasts.

For more on this topic, download our financial planning and analysis report